Relocating Industrial Plants Delivers Win-Win Emission Reduction Benefits to Origin and Destination Regions

Abstract

Relocating pollution-intensive factories is one of the most effective measures to meet mandatory environmental regulations in developed cities while simultaneously imposing environmental pressure on the receiving cities. Existing studies often assume that relocated plants produce the same or higher emissions when relocated. However, the current pollution mitigation policies enforce even higher emission standards in the destination after plant relocation. We employ a bottom-up pollution accounting approach to assess the impact of intraregional or interregional relocation of iron and steel plants in China's Beijing-Tianjin-Hebei (BTH) area on various air pollutants; specifically, seven policy scenarios are modeled, based on stringency, implementation scope, and production technologies. We find that relocation combined with emission standards enforcement and shifts from BOF (basic oxygen furnace) to EAF (electric arc furnace) production technology may significantly reduce emissions within and outside BTH areas by as much as 28.8% compared to business as usual. The observed reduction is mainly due to the requirement of meeting ultralow emission standards directly or indirectly after relocation. Both origin and destination cities benefit from the relocation, with limited emission spillovers (+9.1%) for destinations outside BTH and even a net reduction (9.4%) in Tangshan. We conclude that combining factory relocation with stricter emission standards and production technological innovation could circumvent the Pollution Haven Hypothesis and deliver win-win air pollution reduction benefits for both origins and destinations.